What on earth’s going on with FAANG stocks?

FAANG stocks helped drive the NASDAQ skywards for over a decade until they fell out of favour. What’s happened to them and would I buy any today?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Bronze bull and bear figurines

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FAANG stocks were wildly popular with investors for over a decade. This cohort of five NASDAQ-disruptors saw incredible share price gains, resulting in four of them entering the trillion-dollar market cap club. However, fortunes have changed dramatically for most of these stocks over the last 18 months or so.

When I say ‘FAANG’, I’m speaking of the acronym of the following shares:

  • Facebook, which is now part of Meta Platforms
  • Apple (NASDAQ:AAPL)
  • Amazon
  • Netflix
  • Google, which is now part of Alphabet

Since mid-November 2021, most of these stocks have fallen substantially. What’s going on here?

CompanyMarket capitalisation Share price since mid-November 2021
Apple$2.28trn-10%
Alphabet$1.15trn-39%
Amazon$935bn-50%
Meta Platforms$448bn-49%
Netflix$138bn-54%

Why has Apple fared better?

Both Amazon and Meta have lost their trillion-dollar market-cap status in the last couple of years. Alphabet’s downwards trajectory — triggered by increasing competition and declining advertising revenue — could also take it out of this exclusive list sooner rather than later.

However, with a mighty market cap of $2.28trn, Apple is unlikely to fall beneath the 10-digit threshold anytime soon. Indeed, as things stand, it’s worth more than Amazon, Netflix, and Meta combined! Why has this happened?

Well, most of these companies are encountering unique problems that haven’t significantly impacted Apple. Firstly, advertising accounts for the vast majority of both Alphabet and Meta’s revenue. And advertising is one of the first things companies pare back on when an economic downturn is looming.

Both companies are already seeing slowdowns in ad spending on their platforms. There’s a risk this could continue for some time. However, Apple’s ad business currently generates a little over 1% of its annual revenue. So it’s much less affected.

Plus, Meta has lunged headfirst into the metaverse —  an alternate, digital universe that does not even exist yet. The risks and costs associated with this are obvious, and are reflected in the share price decline. Meanwhile, Apple is patiently waiting to see how the metaverse unfolds before officially launching products.

Finally, founders Jeff Bezos and Reed Hastings have both stepped down as CEOs at Amazon and Netflix, respectively. There’s a risk these successions don’t work out. However, long-term Apple CEO Tim Cook remains at the helm, with no plans to leave anytime soon.

I’ve been buying

I think this shows the pointlessness of lumping distinct businesses together under one term and treating them almost as a single entity. Having said that, I did recently invest in the end (the -NG bit) of FAANG. Netflix and Google-parent Alphabet, that is.

Netflix is attempting to reaccelerate growth by introducing ad-supported subscription plans. I think this ‘Act 2’, as it were, is a logical move on the part of the streaming giant. The profit margins on advertising can help fund its capital-intensive content creation, improving its bottom line.

For Alphabet, the concern is that its high-growth days are over. But that’s reflected in the fact that the stock is now the cheapest it has ever been. It currently has a forward price-to-earnings ratio under 15. But I fully expect its digital-ad empire to generate billions in profits for a good few more years yet.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Ben McPoland has positions in Alphabet, Apple, and Netflix. The Motley Fool UK has recommended Alphabet, Amazon.com, Apple, and Meta Platforms. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »